Dollar Mixed Before Data Floods The Wires

Starting this week off just as the last one ended, dollar traders found few fundamentals to make a market on. Instead, looming geopolitical risk has helped depress greenback volatility ahead of a string of indicators that are expected to offer less than impressive results.

For price action, EURUSD offered the only genuine dollar bullish move since the Asian session. From an overnight test right on the edge of 1.32, the pair pulled back all the way to 1.3150. The euro’s close cousin, the Swiss franc, put up a better fight with the pair trading in a 40 point range above 1.2295 for most of the day. The GBPUSD pairing has stuck to a 20-55 point range since the New York open on Friday, with resistance sited at 1.9665. Finally, yen bidding pushed USDJPY another 70 points lower to 120.35, though a sharp ‘v-bottom’ suggests the move lower has been put off for now.
Fundamentals were in short supply Monday morning, with many of the same influences from Friday holding over to today. The one fresh event for the market to incorporate into the dollar’s value was Federal Reserve member Bies’ speech to the Global Association of Risk Professionals on Basel II. The board member took the conservative line on a banking agreement that would require a higher capital minimum to cover default risk on some portfolios. She said that regulators were considering postponing the risk part of the agreement until 2009. While on the topic, Bies touched on the corrosion in the sub-prime mortgage market, which has added to the dollar’s ailment in recent weeks. However, she too was optimistic on this front saying adjustable rate, sub-prime mortgages accounted for a very small slice of the entire market. All in all, news sources reported few comments pertaining to monetary policy or the overall health of the economy, suggesting Bies will not attempt to jar the FX market before retiring at the end of March.
For the rest of the market, Iran and crude oil were once again the top headlines flashing across screens. Last week, the UN’s deadline for Iran to halt its uranium enrichment efforts expired without the Western world’s desired results. Since then there have been few official comments to suggest where both parties will go from here. However, there is considerable conjecture. Media outlets have easily satiated the quiet uncertainty with Iranian President Mahmoud Ahmadinejad’s comments that the nation’s atomic program has no brakes or reverse gear. While a direct impact on the dollar is not crystal clear, the correlation for crude and gold was. Crude has easily cleared $60 and $61 per barrel with few signs of slowing. Looking ahead, event-driven moves will be back on the menu as soon as tomorrow. Durable good orders for January will start the New York session off at 13:30 GMT with a negative consensus preparing traders for a weak turn. A little later in the day, existing home sales, the Conference Board’s consumer confidence survey and the Richmond Fed Reserve’s manufacturing survey will compete for the market’s attention.
Stocks were mixed in the morning hours as M&A activity and analyst upgrades were offset by rising energy prices. By 16:15 GMT, the NASDAQ Composite marked the biggest move in a 0.27 percent drop to 2,508.29. The S&P 500 Index put up the biggest advance with a 0.19 percent move to 1,453.92 while the Dow rose 0.1 percent to 12,659.66. Within the groupings, one of the biggest stories involved a private-equity group’s bid for utility TXU. The group agreed to pay a total $45 billion for stock and debt acquisition, which sent shares of TXU soaring 13.5 percent to $68.10. With more pessimistic news, American Express shares dropped $0.74 or 1.3 percent to $57.28 after the media caught wind of CFO Gary Crittenden moving over to Citigroup.
Government debt benefit from investors looking to avoid risk in tomorrow’s economic releases and the growing tension in the Middle East. The ten-year note put up a 8/32nds advance to 99-28 by 16:15 GMT, as its yield slipped 3 basis points to 4.639. Bonds rose 16/32nds to 100-02, forcing yields to shed 3 basis points to 4.745.